Welcome & Introductions Ken Frazier, Chairman and Chief - - PowerPoint PPT Presentation

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Welcome & Introductions Financial & Value Creation Overview Commercial Growth Drivers: KEYTRUDA & Beyond Animal Health Innovation Merck R&D Strategy Overview Pipeline Opportunities Future of Merck R&D: Panel Discussion Q&A / Closing Remarks Lunch Break Breakout Sessions

Ken Frazier, Chairman and Chief Executive Officer

Rob Davis, Chief Financial Officer and Head of Global Services

Frank Clyburn, Chief Commercial Officer Rick DeLuca, President, Merck Animal Health

• Dr. Roger M. Perlmutter, President, Merck Research Laboratories
• Dr. Roy Baynes, Head of Clinical Development and Chief Medical Officer, and Mike Nally, Chief Marketing Officer

Merck Research Laboratories Leadership: Dr. Dean Li, Dr. Fiona Marshall and Dr. Daria Hazuda Pipeline Deep Dive Next Generation Discovery International Opportunity & China All All

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FORWARD-LOOKING STATEMENT

OF MERCK & Co., Inc., Kenilworth, N.J., USA

These presentations from Merck & Co., Inc., Kenilworth, N.J., USA (the “company”) include “forward- looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2018 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s internet site (www.sec.gov).

WELL POSITIONED TO DELIVER STRONG SHAREHOLDER RETURNS

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Rob Davis

Sustained long-term revenue growth Meaningful

• perating margin

expansion Balanced and disciplined capital allocation

Investing in the business to innovate for patients globally

GROWING REVENUE DRIVEN BY DEMAND FOR INNOVATION IN THE FACE OF PRICING HEADWINDS

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Rob Davis

Leading oncology portfolio with significant growth potential Durable growth with significant competitive advantages Broad portfolio delivering demand-driven growth Global leader delivering above-industry growth rates

Expect strong revenue growth every year, including 2023 – the year of greatest impact of JANUVIA LOE

1 Includes specialty products in the pipeline that have not yet launched

ONCOLOGY VACCINES HOSPITAL / SPECIALTY

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ANIMAL HEALTH

FORTIFYING OUR FUTURE AHEAD OF THE CHANGING LANDSCAPE

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Rob Davis

Creating headroom for innovation and sustainability of our mission

Becoming a leaner, more efficient, science-driven company to accelerate growth

• Focusing organization and resources on greatest opportunities for growth
• Evolving operating model and culture to be more agile and efficient
• Building optionality for next wave of innovation

Leveraging new digital capabilities and automation

• Better enable innovation
• Expand customer and patient reach
• Enhance supply chain efficiencies
• Simplify back office operations

EXPECT MEANINGFUL OPERATING MARGIN EXPANSION & INCREASED ROIC

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Rob Davis

Return on Invested Capital (%)1

1Excludes BD & Goodwill

Non-GAAP SG&A as % of sales Non-GAAP R&D as % of sales

12% 11% 10% 8% 14% 2014 2015 2016 2017 2018 2023 2014 2015 2016 2017 2018 2021 2022 2023 30% 2014 2015 2016 2017 2018 2021 2022 2023 20%

Non-GAAP Operating margin expansion (%)

2014 2015 2016 2017 2018 2021 2022 2023 40%

R&D Investments: Continued investments in internal innovation CapEx: ~$16 billion of capital projects through 2022 focused on manufacturing capacity for our growth businesses, R&D discovery buildout and IT infrastructure Dividends: Target payout ratio of 47%-50% over time

VALUE-CREATING CAPITAL ALLOCATION STRATEGY

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Rob Davis

After-Tax R&D CapEx Dividends Excess Capital for BD & Share Repo

Capital allocation priorities

• ver the next 5 years

Commitments

Expect to generate significant free cash flow over the next 5 years

Discretionary

1Assumes financing consistent with A1 rating

Business Development: Value-creating, bolt-on acquisitions and strategic collaborations to further enhance portfolio and pipeline Share Repurchases: Return excess cash to shareholders

Financing Activity

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STRATEGIC BUSINESS DEVELOPMENT FUELING INNOVATION

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Rob Davis

• Developing portfolio through value-creating

acquisitions

• Investments in innovative mechanisms and

technologies

Bolt-on acquisitions

• Meaningful partnerships across all stages of

development

• Working with a broad range of partners from

academia to biotech to pharma

Strategic collaborations and licensing

Completed ~60 transactions in 2018 spanning acquisitions, licensing, technology deals and clinical collaborations

1Peloton expected to close in 3Q 2019

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POSITIONED TO DRIVE SUSTAINABLE GROWTH AND SHAREHOLDER VALUE

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Rob Davis

Sustained long-term revenue growth including 2023 – the year

• f greatest impact of JANUVIA LOE

Meaningful operating margin expansion through strong revenue growth driving favorable mix and further leveraged by expense productivity, thoughtful resource allocation and simplification Value-creating capital allocation strategy to enable growth and return of capital to shareholders